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What Mortgage

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  • 25-06-2010 11:32am
    #1
    Jenn15
    Closed Accounts Posts: 23 ✭


    Hi Guys

    I know this has been asked several times before, but we;'ve just been back from the bank regardign a mortgage and it was like she was speaking in a different language i just dont get all these types of mortgages and i didn want to ask her what the best type of mortgage is cos she prob would of told us the one that most benefits the bank, so im asking you!!!!

    1 yr fixed/2yr fixed/3 fixed/variable??

    she also said something about protection cover it was over 100 euro extra per month, should we strongly consider this??

    Thanks


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    #2
    Duckjob
    Registered Users Posts: 2,859 ✭✭✭Duckjob


    Jenn15 wrote: »
    Hi Guys

    I know this has been asked several times before, but we;'ve just been back from the bank regardign a mortgage and it was like she was speaking in a different language i just dont get all these types of mortgages and i didn want to ask her what the best type of mortgage is cos she prob would of told us the one that most benefits the bank, so im asking you!!!!

    1 yr fixed/2yr fixed/3 fixed/variable??

    she also said something about protection cover it was over 100 euro extra per month, should we strongly consider this??

    Thanks

    Fixed rate mortgages lock both you and the lender into a contract where you pay a specific rate of interest on the loan for a specific term 1/2/3/5 yrs.

    After the term of the fix elapses, you will revert to the lenders current variable rate unless you sign up to another fixed rate.

    While on a fixed rate mortgage you also generally have to repay according to the schedule. (ie. if you have extra cash you can't easily overpay to pay down the mortgage quicker)

    With a variable rate mortgage the bank can change the rate at any time (if the European Central Bank raises the base rate for example) or, as has started to happen recently, simply because the banks want to squeeze existing customers a bit harder to get in more cash for themselves.

    With a variable mortgage, you're free to make extra repayments whenever you like to pay down the mortgage quicker.

    Which is better? When, it depends on your preference. Some people prefer the security having fixed repayments for a few years. On the other hand, the banks invest a lot of money on market analysis before they set their fixed rate offerings, and many people take the view that you are unlikely to "beat" them on fixed rates.

    Not sure of the in's and outs of payment protection so I'll leave someone else to field that.


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    #3
    AntiRip
    Closed Accounts Posts: 2,244 ✭✭✭AntiRip


    With regards the protection payment, you don't have to get that off that particular bank so I would strongly suggest shopping around for that.


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    #4
    Dirk Gently
    Closed Accounts Posts: 4,784 ✭✭✭Dirk Gently


    The payment protection is handy to have but its very expensive. It works out roughly that you will pay out twice the maximum amount you would get back. It will cover your mortgage for 12 months max but you can only use it once. You'll find it will cost you around 24 months over the mortgage.

    BOI will allow you to part cover the mortgage, i.e you can cover say €200/ 300 / 400 / 500 etc per month instead of covering the whole monthly amount. As far as I know the other lenders will only allow you to cover the full amount.

    It's optional, you dont have to get it but its a safety net in the current jobs market when going for a mortgage. People feel better having it and the banks charge you through the nose for it. The people in the bank will always try and push the most expensive products on you so just listen to what they have on offer then get some third party advise and pick the option that suits you best. don't take the banks word on the best policy to suit you. Go to a different company even if you dont like the additional policies on top of your mortgage. Your under no obligation to do everything in house with one bank.

    I part protected mine at €300 per month at a cost to me of €22 per month.
    As for the terms, I'd fix it at 3 if you can afford it. I opted for 2, couldn't resist the low interest rate. Drew down the loan 1 day before the rates rose so was very lucky in the timing. Remember, your interest rate is only locked when you draw down the money, not when they offer you the different rates. The rate could rise inbetween their offer and you actually getting into a position to request the cheque after all the legal jazz is out of the way.


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